TANZANIA – Kilombero Sugar Company Limited (KSCL), Tanzanian subsidiary of Illovo Sugar Africa, has signed a two-year contract with 20 Kilombero Sugarcane Cooperative Unions to manage production and supply of the commodity to the sugar processing company.
The deal which was signed between KSCL’s Managing Director, Guy Williams and Chairman of Kilombero Sugarcane Cooperative Union (KSCU) Onesmo Mwakyambo gives the out-growers a reliable and lucrative market for their commodity.
“This agreement is very important because it provides us with a guarantee of the sustainable supply of cane as a raw material and confidence in the factory expansion project,” Williams said.
The move comes at an opportune time as the giant sugar processor has commenced its Tsh 571.6 billion (US$238.5 million) expansion project in Tanzania, which had been in the pipeline for a number of years.
Following the obtention of the go-ahead, this new development will increase Kilombero’s sugar production by 144 000 tons from current levels of around 127 000 tons of sugar per annum, to 271 000 tons.
The project construction phase is expected to take 25 months and completion is expected in July 2023.
A driving force behind the manufacturing expansion will be the almost three-fold increase in cane supply from Kilombero’s small-scale growers, from 600 000 tons currently to 1 700 000 tons.
This will in turn translate to an increase in the total number of small-scale farmers supplying cane to the expanded company sugar factories from 7 500 to between 14 000 and 16 000 growers, thus positively impacting directly an additional 50 000 people in the Kilombero valley surrounding the sugar operations.
The significant increase in cane volumes supplied by Kilombero growers will triple the revenues paid to them to around Tsh 270 billion by 2028.
Importantly, the proposed new sugar factory has been sized so that all of the available cane will be crushed by end of December each year, in order to minimise disruptions and losses often caused by the onset of the rainy season.
Further to that there will be an increase in direct employment by over 2 000 jobs both at the company and through the expanded grower cane supply.
In remarks after inking the deal, KSCU’s Chairman, Onesmo Mwakyambo said the renewed contract is very important to the farmers because it assures them of the market especially after the factory expansion project is completed.
“We currently have the capacity of producing more cane than what the mills can crush annually, and the quantity as well as quality of our cane has improved very much particularly due to improved road infrastructure that has made it easier to transport sugar cane from farms to the factory,” he noted.
The project will be of high economic importance as total taxes of Tsh 66.8 billion (US$28.96m) currently paid by the company are estimated to increase three-fold as a result of the expansion and improved business performance by 2028.
Kilombero Sugar Company’s total contribution to the economy will more than double from the current Tsh 340 billion (US$147.4m) per year to an estimated Tsh 750 billion (US$325m).